Wage Determination and Efficiency in Search Equilibrium

Peter Diamond

The Review of Economic Studies, 1982, vol. 49, issue 2, 217-227

Abstract: Using a simple search technology and the Nash bargaining solution, the paper derives the steady state equilibrium negotiated wage as a function of the equilibrium unemployment and vacancy rates. For this wage, the lifetime expected present discounted value of earnings of a new worker is compared with the social marginal product of a new worker. These are not generally equal implying inefficient incentives for labour mobility.

Date: 1982
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:49:y:1982:i:2:p:217-227.

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